CS writes:
So we cannot consider letting some banks fail without considering making every bank fail?
I guess it depends which banks we are talking about. "Too big to fail" is the phrase generally used here.
CS writes:
What kind of flimsy house-of-cards are we talking about?
One that needs radical and deepseated reform. That one of the Occupy movements demands.
CS writes:
I don't see how letting, say, Bank of America fail would mean that my Local Building & Loan would fail as well. Why would everyone pull their money out of their local bank because a corporate one failed?
As I understand it the problem is one of complexity related to derivatives and the fact that no one really knows how much exposure one financial institution has to any given other.
Very few banks were actually left to fail and we still ended up with a credit crunch and recession. What would have occurred if all banks that would have collapsed had just been left to do so? That is the question.
CS writes:
How about this scenario: Joe the Banker opens up a new local bank for people that have left the big corporate ones. Couldn't that work?
Why don't you be "Joe the banker" and let me know what obstacles stand in your way. Starting capital would seem an obvious hurdle.
CS writes:
If there were other banks, tho, then it wouldn't be the problem you're making it to be.
Christ CS I of all people am not advocating bailing out banks for the sake of it or to save the asses of fuckwitted bankers!! I'm saying that if there really is a possibility of complete financial paralysis, extreme almost overnight economic contraction leading to depression and the complete collapse of the economic system as a whole - Then bailing out banks is a less worse option.
If a given bank can definitely fail without causing even greater adverse consequences then - absolutely - let it go.